As others have noted, the US Mint does essentially the same thing with some of its coins. A few years ago, a guy named Robert Kahre tried to use the face value/actual value differential of US coins (as well as unrelated questionable claims) to avoid paying payroll taxes. The courts disagreed with his methods and he's currently serving over 15 years in prison. I'd imagine the Canadians would take a similar view.
– PopsSep 23 '17 at 1:11

3 Answers
3

Just because the coins are legal tender does not mean that they are "in circulation" and people are spending them at stores.

Yes, the Canadian Gold Maple Leaf is legal tender, as is the American Gold Eagle. All this means is that if you owe a debt of $50 to someone, you can give them one of these coins, and they are required to accept it as payment in full.

However, the coins have an intrinsic value that is much higher than the face value. They have this high intrinsic value because of the gold content. It would be foolish to give them to someone in exchange for $50 worth of goods.

To answer your question, they could be melted down and have the gold harvested (illegally). However, doing so would decrease the value somewhat. The gold content contributes to the value, but they also have value as collectors items. The coin form also helps specify the purity and weight of the coin, and if the coin is melted, the resulting gold lump would need to be tested by a buyer to verify the purity and weight. As a result, these coins don't get melted, and people needing gold for utility purposes don't buy coins and melt them, as it would be more expensive than just obtaining raw gold.

Right, melting these would reduce the value because of the increased transaction costs.
– JimmyJamesSep 22 '17 at 19:52

3

Theoretically, since it's illegal to melt them down, the gold content is forever trapped within the coins, hence in a crime-free world it would make the intrinsic gold content irrelevant, unless the Canadian government would buy them back.
– raptSep 22 '17 at 20:14

@rapt Assuming the laws never change, which is usually a bad assumption.
– MattSep 22 '17 at 23:23

@rapt Someone that particularly scrupulous could just take the coins to another country.
– chrylisSep 23 '17 at 10:05

1

@Matt especially in a crime free world, laws would have to change, otherwise what to do with all the legal enforcement guys.
– lalalaSep 23 '17 at 11:14

How could it be that this gold coin was created as legal tender when
its gold content is much higher than its face value?

There are many coins that have market value far above their face value, typically collectibles of limited production. They are often issued to create revenue for the treasury. You can't buy one of these for 50 dollars.

Is it actually being used in Canada as legal tender?

Only foolishly, if at all.

How could these coins have remained in circulation and not being
melted down by everybody?

They're worth more than their gold content alone, they seem to sell on ebay for about USD 1,400, so there'd be no motivation to melt them down, you'd just sell them at market value.

The fiat value of them creates a bottom for their value. That is, they will always be worth C$50 no matter what the value of gold is.

The second point is hard to understand given how low the fiat value is compared to the commodity value of gold. And over time, I would expect that gap to expand with inflation. Unless someone finds a way to turn acorns into gold or something, I can't see how the face value will ever matter.